The optimism generated by the bailout of 750 billion euros for the economic recovery in Europe along with the advance in the development of the coronavirus vaccine had a positive impact on global markets, especially at the beginning of the week. The intensification of tensions between the United States and China, with the closure of embassies and exchange of accusations, generated new stress on markets and allowed the dollar to recover.
In general, risky assets had a more positive week. In the opposite direction, the dollar, as a protective asset, ended up losing value. The U.S. currency ended Friday at BRL 5.2060. For the week it dropped 3.32%. The market signals a change in financial strategies, with a better realignment between the stock market (valued) and the foreign exchange market (pressured). Thus, there is space for the devaluation of the U.S. currency.
In Brazil, the resumption of the discussion on the tax reform was very well-received in the forex market. At this point, the extent of the reform or whether it is sufficient have not been discussed, but the recovery of the debate on structural measures, which are important within a medium and long-term strategic vision.
The exchange rate should remain volatile, as long as there is no vaccine for COVID-19 and also susceptible to erratic activity. This week has a very heavy schedule. Disclosure of the GDP for the second quarter in the Eurozone and United States, and the Fed’s meeting, which should reinforce the idea of more prolonged stimuli to the economy.